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TMI Blog2012 (6) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... aintaining its corporate identity, we are of the opinion that disallowing 50% of the amount is not warranted and is arbitrary. Penalty u/s 271(1)(c) - Held that:- There is no reason for levy of penalty as the basis for levy of penalty was disallowance of the claim which was allowed therein - Decided in favor of assessee. - ITA Nos.2986 & 2987/Mum/2010 - - - Dated:- 20-4-2012 - B Ramakotaiah, Vijay Pal Rao, JJ. For Appellant: Shri Biren Gabhawala For Respondent: Shri M Rajan ORDER Per: B Ramakotaiah: These are appeals by assessee under sections 143(3) and 271(1)(c) of the Act for the assessment year 2005-06 against the orders of Commissioner of Income-tax (Appeals)-5, Mumbai, dated 28-01-2010. 2. The Revenue has raised a preliminary objection that the appeals were time-barred as the assessee has mentioned the service of the orders on 08-04-2010 and filed appeals on 15-04- 2010. It was the Revenue s contention that the orders were dispatched by the CIT(A) on 12-02-2010. Therefore, the appeals were time-barred. The assessee filed a petition and relevant data to indicate that even the CIT(A) s orders were dispatched on 12- 02-2010, the same were not served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Monohill Ltd. (UK) and their reply and placed on record a copy of the assessment order of Addl. Commissioner of Commercial Taxes, Bangalore, dated 13-04-2005 for financial year 01-04-2001 to 31-03-2002 and another order for the period 01-04-2002 to 31-03-2003. It was the contention that after the import of the goods through M/s. Monohill (UK), the assessee could not sell the products due to complaints from various customers who purchased the goods earlier and the stock was available with various consignees unsold. In view of this, with the permission of the Commercial Tax authorities, the entire stock was destroyed and so in the books of account the stock was written off. It was further contended that an amount of Rs.59,41,605/- payable to M/s.Monohill (UK) consequent to the imports was not discharged and this amount of liability was written off to the profit loss account as a credit. The assessee contended that since the stock was not utilizable and its life span was over and as there was no re-sale value, entire stock was destroyed and there is no scrap value also. The AO, however, did not accept the claim and made the disallowance on the reason that the assessee has not fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It was his contention that while accepting the write back, the AO and the CIT(A) did not allow the written off stock and further contended that the alternate plea to restrict the loss at least to that amount also was not accepted. 6. The ld. DR, however, reiterated the arguments before the AO and the CIT(A) to submit that the assessee has not furnished the details and, therefore, the claim cannot be accepted. 7. We have considered the issue and examined the record. As seen from the orders of the Commercial Tax authorities, there is no dispute to the fact that the goods imported and distributed to various consignees were unsold for a longer period and were ultimately destroyed. The order of the Addl. Dy. Commissioner of Commercial Taxes dated 26-05-2005 has the following facts as stated in the said order : It was verified and found that the purchases declared by the company are supported by purchase bills and the test check of purchase bills has revealed that the same are accounted in the books. The company has sold tyres tubes only locally. The details of sales effected by the company during the assessment period in question are as detailed above. Sales declared ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from 06-03-2003 As can be seen from the above, for the year ending 31-3-2003, the assessee had sales to the extent of Rs.6,36,914/- and Rs.5,99,295/- under KST Act and Rs.40,822/- under CST Act. Further, the order also indicates that closing stock was available as claimed in the books of account as on 31-3-2003. The same stock was shown in the balance-sheet as on 31-3-2003 and 31-3- 2004 in the books of account. It is also on record that on a representation made by the company the Commercial Tax authorities examined and gave an order that the company has destroyed the stock held at the head office and advised the consignment agents to destroy the stock. These aspects were examined on the basis of the correspondence entered into with consignment agents outside the State and after examination the Dy. Commissioner of Commercial Taxes cancelled the registration w.e.f. 06-03-2003 of the RCs granted to the company. Once these aspects were accepted by the statutory authorities i.e. the Commercial Tax authorities, we are unable to understand why the Revenue could not accept these facts. When the assessee submits that there are no agreements with M/s.Hankook Tyres Tubes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing 50% of the amount is not warranted and is arbitrary. We notice that the reason for disallowance by the AO was that there was no business activity, whereas the CIT(A) confirmed on the reason that details have not been furnished before the AO. Thus, it indicate that the reason for disallowance is not justifiable. We are of the opinion that assessee deserves to succeed on this ground raised. We direct the AO to allow the expenditure as claimed. This ground is also allowed. 10. In the result, the appeal is allowed. ITA No.2986/Mum/2010: 11. This is an appeal on the penalty levied by the AO on the disallowance of the claim of stock written off in the books of account. Even before the appellate proceedings were completed, the AO levied the penalty and the CIT(A) confirmed the same along with the appeal on quantum. Since the assessee s appeal on quantum was allowed in the above appeal in ITA No.2987/Mum/2010 , there is no reason for levy of penalty as the basis for levy of penalty was disallowance of the claim which was allowed therein. In view of the above, the penalty levied u/s.271(1)(c), on the disallowance of the claim made by the assessee, is hereby cancelled. App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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